Report in which the committee requests to be kept informed of development - Report No 382, June 2017

Case No 3159 (Philippines) - Complaint date: 25-AUG-15 - Closed

Allegations: The complainant organization alleges anti-union practices, including union busting, mass termination of contracts and violations of the existing collective agreement, carried out by the company against the Boie Takeda Chemicals Employees Association – Federation of Free Workers (BTCEA–FFW) and allowed by the authorities

1. 519. The complaint is contained in a communication from the Trade Federation for Drugs/Chemicals/Petroleum – Federation of Free Workers (TF 3) dated 25 August 2015.
2. 520. The Government forwarded its response to the allegations in communications dated 31 May and 20 October 2016.
3. 521. The Philippines has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainants’ allegations

1. 522. In a communication dated 25 August 2015, the complainant organization TF 3 wishes to bring to the attention of the Committee the anti-union practices carried out against the union Boie Takeda Chemicals Employees Association (BTCEA–FFW), by Takeda Pharmaceuticals Philippines Inc. (TPPI, hereafter: the company)/Takeda Healthcare Philippines Inc. (THPI, hereafter: the new corporation), owned by the homonymous mother company in Japan. The complainant denounces that the anti-union practices were legitimized and allowed with impunity by existing laws and practices of the Securities and Exchange Commission (SEC). In particular, the company circumvented the law of the SEC by registering a new corporation, in order to get rid of the BTCEA–FFW as well as to renege its obligations under the existing collective bargaining agreement of the parties covering the period from 1 January 2013 to 31 December 2017.
2. 523. The complainant indicates that the BTCEA–FFW has been in existence since 1991, and that at that time the union had embedded the then different enterprise name in its designation. The BTCEA–FFW has since entered into several collective bargaining agreements. The current collective agreement concluded with the company covers the period from 1 January 2013 to 31 December 2017.
3. 524. According to the complainant, in September 2011, the mother company bought a pharmaceuticals business with headquarters in Switzerland and an existing branch in the Philippines, which was unorganized, unlike the company. In 2013, the union BTCEA–FFW manifested the willingness with management to include the employees of the newly acquired business as part of the collective bargaining unit of the company considering the fact that they were now under the same management. However, the company management set it aside and advised the union to wait for the full integration. In the observance of harmonious relations, the union conceded.
4. 525. The complainant states that, in May 2014, the BTCEA–FFW negotiated for their salary increase for the years 2014 and 2015. Due to failure of the parties to enter into an agreement, the BTCEA–FFW declared a bargaining deadlock and sought a third-party intervention before the National Conciliation and Mediation Board (NCMB). When conciliation failed, both parties agreed to submit the issue before the voluntary arbitrator. While the case was still pending before the latter, there was an initiative that resulted in the settlement of the issue submitted before voluntary arbitration. The respondent (the company), through the HR Director, offered a salary increase across the board for 2014 and for 2015. This offer was accepted by the BTCEA–FFW through a compromise agreement (attached to the complaint) since it was accepted by the majority of its members.
5. 526. The complainant alleges that, without the knowledge of the BTCEA–FFW, the company subsequently registered before the SEC a new corporation, which was claimed to be a subsidiary of another firm wholly owned by the mother company. The HR Director of the new corporation – one of the respondents in the case before the National Labor Relations Commission (NLRC) – is at the same time board member of the company and represented the latter during the mediation proceedings before the NCMB. According to the complainant, she has full knowledge and is privy to the information regarding the above acts of bad faith committed by the company that affected significantly the conditions and status of the BTCEA–FFW and its members including the blatant act of union busting and gross violation of the provisions of the parties’ existing collective bargaining agreement, and clear violation of ILO Conventions Nos 87 and 98. On 29 January 2015, the HR Director sent an email addressed to all employees of the company informing them about a town hall meeting on 3 February 2015 to discuss the legal integration of the newly acquired business, which in fact refers to the announcement of the abolition of the union and the undue discontinuance of the existing collective bargaining agreement between the company and the union.
6. 527. The complainant further indicates that, on 3 February 2015, before the town hall meeting commenced, the then officers of the BTCEA–FFW namely, Cecilia Villarama (President), Ruth Garcia (Vice-President), Rossana Resurreccion (Secretary), Magdalena Buama (Treasurer), Erica Joy Antonio-Romualdo (Auditor) and Aurea Martin (PRO), were called for a closed-door meeting. They were informed by management that the company would cease its commercial operation effective 31 March 2015 and that thus the BTCEA–FFW would also cease to exist. Further, in order for all union members to continue their employment they would need to re-apply with the new corporation, failing which they would be terminated effective 31 March 2015 (PowerPoint slide included in the complaint). The same information was provided to all employees present at the town hall meeting. All employees of the company were forced to re-apply with the new corporation to continue their employment lest they would be terminated effective 31 March 2015. It was specified that all employees of the company who re-applied with the new corporation would retain their seniority rights and all benefits enjoyed while employed with the company, except their membership with the BTCEA–FFW and all matters relating to the union, the latter having supposedly ceased to exist effective 31 March 2015.
7. 528. The complainant states that the pro-forma employment offer given to all employees of the company on 3 February 2015 carries at the top of the form the names of both the company and the new corporation and at the bottom left of the form the company name and address, and reads as follows:
   • A new corporation … will soon be distributing … products in the Philippines and is currently hiring new employees. In this connection, we are pleased to inform you that you have the option to apply for an employment position with … [the new corporation]. If you apply and … [the new corporation] is interested to hire you, for a position similar to your current position in … [the company], you will receive an employment offer, which includes a salary the same as or close to your current salary and the benefits outlined in the attached annex. … [The new corporation’s] offer will also include giving you full credit for the length of your service to the company when determining your length of service to … [the new corporation]. However, the tax treatment of your compensation and benefits moving forward may vary depending on the tax laws and regulations applicable to your employment with … [the new corporation]. If … [the new corporation] extends you an employment offer and you accept the said offer, your employment relationship with the company will be deemed to have ended effective on the date you start your employment with … [the new corporation] which is anticipated to be on 1 April 2015. Furthermore, because … [the new corporation] is offering you employment without loss of your accrued length of service to the company and there is no employment termination by the company when you accept … [the new corporation’s] employment offer, you will not receive or be entitled to any separation pay, retirement plan benefit or any kind of separation-related payment or notice from the company as a result of your leaving the company to pursue employment with … [the new corporation]. In the event that you apply for a position at … [the new corporation] and you accept the employment offer that … [the new corporation] extends to you in response to your application, but you subsequently decide not to pursue employment at … [the new corporation], you will only be entitled to receive a resignation benefit pursuant to the company’s Retirement Plan, and you will not receive or be entitled to any other separation pay or separation-related payment or notice from the company. Should you decide not to apply for an employment position at … [the new corporation] or if you apply but … [the new corporation] does not extend you an employment offer or if you do not accept … [the new corporation’s] employment offer in a timely manner, you will remain employed with the company, without prejudice to the right of the company to terminate your employment for any valid reason, such as cessation of operations of the company. Please signify your decision to apply or not to apply for an employment position at … [the new corporation] by accomplishing the “Employee’s Decision” portion in the next page and returning one signed original to the HR Director no later than 6 February 2015. In case you have any queries regarding the foregoing, please feel free to get in touch with the HR Director. Thank you.
8. 529. The complainant underlines the clear participation of the HR Director in the facilitation of the transfer of all employees of the company to the new corporation. Also, the above memorandum proves that all activities relating to the transfer of employees to the new corporation was done and facilitated by the company.
9. 530. The complainant adds that, on 4 February 2015, the union filed a notice of strike before the NCMB to vehemently protest against the above clandestine changes implemented by the company without its knowledge. The strike notice was anchored on the following grounds: (1) union busting; (2) mass/illegal termination; (3) violation of ILO Conventions Nos 87 and 98; and (4) gross violation of the provisions of the Collective Agreement. Seven conciliation meetings were held but no settlement was reached. After complying with the procedural requirements, the union went on strike in front of the company seat on 31 March 2015.
10. 531. The complainant denounces that – effective 1 April 2015 – while all employees who re-applied with the new corporation retained their seniority status and other benefits, the BTCEA–FFW was no longer recognized by the new corporation and all matters relating to it and its collective bargaining agreement were unjustly no longer recognized nor given effect.
11. 532. The complainant highlights what it considers to be the clear and evident similarities between the company and the new corporation. As shown below, the new corporation, as the company, continues to adhere to the same corporate philosophy carrying the name of the mother company. According to the complainant, during the Values Council orientation held on 10–11 August 2015, the PowerPoint slides (included in the complaint) presented to the participants who were all employees of the new corporation, clearly show that the new corporation claims continuity of the same corporate philosophy as that of the company. In fact, while the new corporation was only formed in 2014, it clearly claimed to the participants that its identity or current corporate philosophy was established in 2002 and that this is the management philosophy that has guided the mother company throughout its 230 years of service.
12. 533. The complainant further alleges that the new corporation continues to sell the same products as sold by the company (2014 price list or product list attached to the complaint), and that other similarities between the new corporation and the company include identical corporate business address, corporate contact numbers, the corporate logo and the corporate website. Moreover, the majority of the board of directors/officers of the company and the new corporation are the same persons. The appearance of business cards provided by the company and the new corporation, including emails referring to the same corporate website, is also identical. The complainant indicates that, on 15 June 2015, the union withdrew its case before the NCMB and subsequently filed the case before the NLRC for unfair labour practices including union busting, gross violation of the provisions of the existing collective bargaining agreement (1 January 2013–31 December 2017), violation of ILO Conventions Nos 87 and 98, moral and exemplary damages, and attorneys’ fees. The parties were about to submit their respective position papers on 1 September 2015.
13. 534. The complainant considers that the union busting and unfair labour practices happened through the SEC which practically facilitated the abuse perpetrated by the company against the BTCEA–FFW when it allowed the registration of the new corporation which was being formed by corporate officers of the company. Worse, the said registration became the springboard of corporate abuse as it was used to transfer the company’s business networks, assets, operations and all its employees to the new corporation.
14. 535. The complainant concludes that allowing such practice sets a dangerous precedent where any company can now go scot-free from its obligations with the union by just registering another new corporation that continues to sell the same products, and assumes all previous corporate business networks and employees but can unjustly refuse to recognize the existing union of the original company and the parties’ existing collective bargaining agreement by simply saying that they are now a “new” corporation. The BTCEA–FFW strongly seeks intervention and prays that its right to self-organization be respected, including that the existing union be continually recognized as the exclusive collective bargaining agent under the new corporation; and that the existing collective bargaining agreement concluded between the company and the union which is to expire on 31 December 2017 will still be given full force and effect.

B. The Government’s reply

1. 536. In its communications dated 31 May and 20 October 2016, the Government refers to the complainant’s allegations of anti-union practices of the company against the BTCEA–FFW, in particular the circumvention of the law of the SEC by registering a new corporation, so as to get rid of the union as well as to renege on its obligations under the collective agreement in force.
2. 537. The Government confirms that: (i) following a notice of strike filed by the BTCEA–FFW, a series of conciliation–mediation meetings before the NCMB took place but no settlement agreement was reached; (ii) on 1 April 2015, while all employees who re-applied with the new corporation retained their seniority status and other benefits, BTCEA–FFW and the collective agreement were no longer recognized by the management; (iii) on 15 June 2015, the union withdrew its case before the NCMB and filed a case before the NLRC for unfair labour practices with the Regional Arbitration Branch (RAB) (National Capital Region (NCR)) docketed as Case No. 06-07210-15.
3. 538. In addition, the Government indicates that, in order to complement the arbitration track, the Regional Tripartite Monitoring Body (RTMB) of the DOLE–NCR made use in January 2016 of the Joint Assessment approach under the Labor Laws Compliance System (LLCS) to touch base with employees and management. According to the Government, employees stated that they have an existing union, that is the BTCEA–FFW, and a collective agreement that is still in effect until December 2017, insisted that there is a provision in the collective agreement according to which, in case of a merger, the existing union and collective agreement would still be recognized by the management, and considered that there was no need to form a new union since they already had an existing union and a collective agreement in force. The management representative, on the other hand, stated that the employees were free to form a union.
4. 539. The Government indicates that, subsequently, the RAB–NCR Case No. 06-07210-15 was resolved by the NLRC Labour Arbiter on 29 February 2016 in favour of the BTCEA–FFW as follows: (a) the company, the new corporation and the HR Director were declared guilty of unfair labour practice, and were ordered to pay PHP100,000 (US$2,007) nominal damages plus 10 per cent attorneys’ fees; and (b) the union remains the bargaining agent of the employees in the bargaining unit it represents in the company, who remain members thereof in the new corporation under the collective agreement in force. The management filed an appeal against this decision on 10 May 2016, which is currently pending at the NLRC Fourth Division and docketed as LAC No. 05-001489-16.

C. The Committee’s conclusions

1. 540. The Committee notes that, in the present case, the complainant organization alleges anti-union practices, including union busting, mass termination of contracts and violations of the existing collective agreement, carried out by the company against the BTCEA–FFW and allowed by the authorities. In particular, the Committee notes the allegation that the company allegedly circumvented the law of the SEC by registering a new corporation, in order to get rid of the existing union in the company, the BTCEA–FFW, as well as to renege its obligations under the collective bargaining agreement in force.
2. 541. Furthermore, the Committee notes with interest the initiative taken by the Government to verify, via the relevant RTMB, the situation on the ground in the new corporation, as well as the information gathered, notably the management’s position that the employees are free to form a union and the employees’ stand that there is no need to form a new union since they already have an existing union, the BTCEA–FFW, and a collective agreement in force.
3. 542. Concerning the allegations that the registration of a new corporation was not or not exclusively business related but wholly or partly for anti-union purposes, the Committee generally recalls that, while the genuine closure or restructuring of companies is not contrary to freedom of association principles, the closure or restructuring and the lay off of employees specifically in response to the exercise of trade union rights is tantamount to the denial of such rights and should be avoided [see Case No. 2745 (Philippines), 364th Report, June 2012, para. 985]. The Committee considers that, should the above allegations be true, they would be tantamount to a breach of the right of workers to establish and join organizations of their own choosing and of their right to bargain collectively and would constitute a serious violation of the principles of freedom of association. Moreover, the Committee observes that, according to article V, section 5 “Change of Status” of the collective agreement, the company agrees that in the event of change of status and/or ownership by way of sale, merger, consolidation, receivership, spin-off, attachment, administration and/or other forms of ownership transfer, the company, on a best effort basis, secures the conformity of the successor of all obligations stipulated in the agreement. In light of the foregoing, the Committee notes with interest the decision of the NLRC in which it found both the company and the new corporation guilty of unfair labour practice and ordered the payment of damages as well as the perpetuation within the framework of the new corporation of both the recognition of the BTCEA–FFW and the validity of the collective agreement. The Committee urges the Government to ensure that the status of the union and the collective agreement as ordered by the NLRC are valid pending any decision on appeal. The Committee requests the Government to provide a copy of the above arbitration decision of 29 February 2016 on RAB–NCR Case No. 06-07210-15, and to keep it informed of the outcome of the appeal proceedings and of any relevant developments.

The Committee’s recommendations

1. 543. In the light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendations:
   • (a) The Committee urges the Government to ensure that the status of the union and the collective agreement as ordered by the NLRC are valid pending any decision on appeal.
   • (b) The Committee requests the Government to provide a copy of the above arbitration decision of 29 February 2016 on RAB–NCR Case No. 06-07210-15, and to keep it informed of the outcome of the appeal proceedings and of any relevant developments.